Can Ford Climb Back On Top?

With shares of Ford (NYSE:F) trading around $13, is F an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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T = Trends for a Stock’s Movement

Ford engages in the development, manufacture, distribution, and service of vehicles, parts, and accessories worldwide. The company operates through two sectors, automotive and financial services. It is important to note that a significant portion of Ford’s profit comes from financial services because this is an area that was largely affected during the 2008 downturn. American vehicles have received lower relative worldwide demand but this seems to be changing in recent years. As Ford continues to reshape its business, look for the company to try and work its way back to the top.

Head on over to the next page to explore the technical landscape of Ford’s stock…

http://www.cheatsheet.com/wp-includes/js/tinymce/plugins/wordpress/img/trans.gifT = Technicals on the Stock Chart are Strong

Much like the demand for its vehicles, Ford’s daily price chart displays a stock that has witnessed weak demand. In the last couple of years, the stock looks to be stuck in a range between $10 and $15 per share. A price trend and its strength can be identified using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen below, Ford is trading above all of its key averages which signals a strong uptrend in its stock price.

F

(Source: Thinkorswim)

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Taking a look at the implied volatility and implied volatility skew levels of Ford options may help determine if investors are bullish, neutral, or bearish. As seen in the price chart above, the implied volatility (red) of Ford options is at 25.97 percent today which coincides with a 40th percentile over the last 30 trading days and 38th percentile over the last 90 trading days. What does this mean? This means that investors or traders are buying a good amount of call and put options contracts, as compared to the last 30 and 90 trading days.

The implied volatility skew of April and May put options is steep while call option skew is average. So as of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. Investors are buying a minimal amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Improving Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising growth rates. What do the last four quarterly earnings and revenue growth figures for Ford look like? The last four quarterly earnings growth (Y-O-Y) rates have been: -87.99, 0, -55.93, -42.62 percent while the last four revenue growth (Y-O-Y) rates have all been: 5.34, -2.65, -6.52, and -2.02 percent. Ford has been improving on the earnings and revenue growth front.

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More importantly, how did the street take these numbers? The last four quarterly earnings announcement reactions help gauge investor sentiment on Ford’s stock. The last four quarters have seen next trading session returns of -4.64, 0.8, -1, and -2.3 percent. The street has not been too pleased about Ford’s last four earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Ford stock done relative to its peers and sector? Year-to-date, the stock is returning 0.45 percent while its competitors, General Motors (NYSE:GM), Toyota Motor (NYSE:TM), Honda Motor (NYSE:HMC), and sector are returning -3.86, 7.49, 0.23, and 3.8 percent respectively. Ford has been an average relative performer.

Conclusion

Ford is an established company that is attempting to revolutionize its business. If it can properly do so, the company has ample resources to become one of the strongest global companies. The stock has displayed weak demand largely due to the poor earnings and revenue growth rates posted. Relative to its peers and sector, Ford stock has been an average performer. WAIT AND SEE what Ford does in the coming quarter.

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